Will Russia's planned tariffs hike kill Finnish timber processing?

The Finnish Prime Minister Matti Vanhanen has complained about Russia's plan to raise timber tariffs once again during a meeting with his Russian counterpart, Viktor Zubkov.

Russia is planning a major tariff hike next year but Finland says this could kill off its wood processing industry.

The Prime Ministers of Russia and Finland hailed growing bilateral trade between the two countries at a meeting on Tuesday but couldn't avoid the thorny issue of timber tariffs.

In two years Russia plans to increase export duties on timber to 80% of the value of the wood declared at customs.

With higher tariffs on Russian timber Finland is trying to find alternative suppliers – like Sweden – and boost its own raw timber production. But these volumes do not satisfy the demand of the domestic wood processing industry. Thus some companies are facing problems, they are closing production lines and reducing jobs

Anastasia Kopilova,
analyst, Lesprom Networks

Finnish fears

“We discussed Russian export duties on raw timber with Mister Zubkov. It is a very sensitive issue for Finland now. We had fruitful talks today and will continue negotiations with the European Commission,” Matti Vanhanen, Prime Minister of Finland mentioned.

But Finnish processing companies importing about 20% of their wood from Russia and some of them may not survive the tariff hike. The industry is already facing difficulties.

“With higher tariffs on Russian timber Finland is trying to find alternative suppliers – like Sweden – and boost its own raw timber production. But these volumes do not satisfy the demand of the domestic wood processing industry. Thus some companies are facing problems, they are closing production lines and reducing jobs,” Anastasia Kopilova, analyst at Lesprom Networks in Moscow believes.

Russia says the measures are needed to develop its own wood processing industry. It wants to stimulate the export of value added products not just raw materials.

Russia's position

Russian Prime Minister Viktor Zubkov said that “now Russia has strategic plans to develop its wood processing industry. We invite foreign investors as well as Finnish put their money in the sector. We have already chosen the regions that will host such companies and now it is time to move from intentions to real offers.”

Russia says it will continue negotiations on the matter with the EU and says it'll be easier to find a compromise once Russia has joined the World Trade Organisation.